DOL fiduciary rule: Why trust someone who does not do what is best for you?

June 9, 2016 by Alex Peter

about the author:

Alex Peter

Product marketing strategist

Alex began his career at Advicent as a mid-market business development representative. He now divides his time between assisting his team and working with enterprise clients. Alex is passionate about FinTech and creating success for his team.

When I was 16 years old, I remember going to a car dealer with a price range in mind and a vague idea of what car I wanted to walk away with. I was so excited to get my very own car and enjoy the freedom of owning one. Little did I know, buying a car—a used one at that—can be very overwhelming to a new buyer.

I did not even know what questions to ask because there are a large number of variables when buying a car, some of which I did not even understand. The salesman at the dealership seemed helpful, but something about him made me feel uneasy. I felt he did not have my best interests first. It seemed like I was on my own, and I had to second guess every decision because I was not confident. Many companies use this data asymmetry to pressure you into buying something that might not even be right for you.

Shifting power to the consumer

Is this situation familiar to you? It is not just in car-buying where consumers can feel so overwhelmed that they are paralyzed by the decisions they have to make. Numerous companies are realizing this and trying to even the playing field for the consumer. They are creating services that empower the buyer with easy-to-understand data that the salesman would normally leverage to make the sale.

The sales tactic of controlling data to manipulate the consumer is fleeting fast. Sales organizations now have to be as transparent as possible because the buyer has access to far more information. This forces the salesman to put the consumers’ needs first. This information empowers the consumer by allowing them to easily identify if the salesperson is taking advantage of them. This dynamic is shifting throughout multiple industries, giving the power back to the consumer. For example, CarMax and TrueCar would have helped out 16-year-old me immensely. I could have compared car statistics and learned what the salesperson knew in five minutes.

What does this mean for the financial services industry?

This information symmetry is now moving the financial sector with the new Department of Labor (DOL) fiduciary rule. The ruling demands transparency in the ambiguous investing space on which many consumers of financial advice do not have a firm grasp. Much like CarMax does not give their employees commissions on car sales, the DOL demands the advisor switch to a fee-based model where they do not get paid on the commission of a sale.

This is no surprise because, according to an Accenture survey, 47 percent of high-net-worth clients say they want more transparency from their financial advisor. Taking this new path may mean more work on the advisor’s end with planning and compliance, but it also means the client feels that the advisor is trustworthy, straightforward, and is focusing on a “we, not me” approach. This will lead to higher client retention and more referrals because a trusting relationships will be easier to establish and maintain. Therefore, it seems these changes will pay for themselves in the long run as the businesses grow. 

It is becoming more and more important for clients to feel as though their advisor is making the decision as if they were truly in the client’s shoes. To truly see from the client’s perspective is understanding that losing one’s hard earned money is one of the biggest fears in life for many people. This feeling of loss is heightened when there is ambiguity about how to prepare for your future by investing in things you are not clear about. The facts show it as well – Accenture also found that 65 percent of clients say that quality of advice is the second most important thing in a client-advisor relationship (ranking even higher than frequency of contact). Advisors who understand this mindset will be the most successful because their clients will have more trust in their actions and more satisfaction with the relationship itself. On a larger scale many big firms and banks have difficulty changing the reputation that they are greedy and only do what is best for the shareholder. The DOL ruling gives both the advisor and the firms a chance to re-invent their strategy and show that they understand and do what is best for the clients.


Utilizing FinTech to comply with the DOL fiduciary rule


So what does an advisor do when many firms are worried that they will have to change their business models, incur new compliance costs, and, in some cases, incur litigation risks? Advicent takes on the perspective of the advisor and understands that it can be difficult to fill these expectations from the client and the government. That is why we have developed our software to provide transparency and clarity into your advice-giving process.


With our Narrator product suite giving clients 24/7 access to their financial plan and transactions, they know at all times where they stand with their financial future. The advisor can also trust the credibility of the plan and projected results because of the meticulous calculation engine that powers the planning software has been perfected by Advicent over the last 50 years.


It has been shown that advisors help clients gain three percent more each year on their money. Over 20 years, that is 43 percent more net worth. If advisors want to help clients through the dynamic shifts of life, the financial planning software they leverage must be just as fluid. It must allow for clear communication and collaboration that creates a relationship where the advisor truly can put themselves in the client’s shoes.


Click here to learn more about how Advicent tools can be leveraged in your DOL compliance strategy.

Sign up for the
Advicent newsletter